Oil prices declined on Tuesday as investors weighed the possibility of increased Russian diesel exports against continuing concerns about attacks on energy infrastructure and shipping routes in the Middle East.
Brent crude futures fell $1.62, or 1.52%, to $105.03 per barrel by 08:20 GMT, while US West Texas Intermediate (WTI) futures declined $1.66, or 1.77%, to $92.08 per barrel.
The retreat followed gains of nearly $2 per barrel for both benchmarks during Monday’s session, when Brent settled at its highest level since 15 September.
The latest decline reflected expectations that additional Russian fuel supplies could ease pressure on international energy markets, although geopolitical risks continued to limit the potential for a sustained reduction in prices.
Russian Diesel Export Agreement Raises Questions Over Supply Outlook
US President Donald Trump said Russia had agreed to increase diesel supplies to international markets, following a temporary easing of US sanctions on Russian fuel.
The restrictions were originally introduced to limit Moscow’s energy revenues during its war against Ukraine.
The prospect of additional Russian diesel exports has raised expectations that fuel availability could improve, potentially reducing some of the supply pressures that have supported oil prices.
However, analysts have questioned whether Russia has sufficient refining capacity to meet the proposed export volumes.
Tamas Varga, an associate analyst at PVM Oil, expressed doubts about the feasibility of the country’s stated production and export ambitions.
“Russia’s commitment to supply between 3 million and 3.5 million tonnes per month by the end of the year is unlikely to be fulfilled, given the severe difficulties facing its refining industry,” Varga said.
His assessment highlighted the potential gap between Russia’s announced supply targets and the operational capacity of its domestic refining sector.
The agreement has also generated political opposition in the United States.
Lawmakers from both major political parties criticised the arrangement between Trump and Russian President Vladimir Putin, arguing that it could conflict with US legislation restricting imports of Russian energy until Moscow ends its military aggression against Ukraine.
The dispute has added uncertainty to the implementation of the agreement and the extent to which additional Russian supplies could reach international markets.
For oil traders, the principal question remains whether the announced measures will result in a meaningful increase in available fuel or whether production and regulatory constraints will limit their effect.
Middle East Attacks Maintain Pressure on Energy Markets
Despite Tuesday’s decline in crude prices, concerns about the security of energy infrastructure and maritime transport in the Middle East remained elevated.
Iran-aligned Houthi forces reportedly attacked Riyadh’s international airport over the weekend, while additional incidents involving commercial tankers were reported near the Strait of Hormuz.
The developments renewed concerns about the vulnerability of regional transport routes and the potential consequences for international oil shipments.
The Strait of Hormuz is a strategically important passage for crude oil and petroleum products, making disruptions in the area particularly significant for global energy markets.
Attacks on commercial vessels can increase shipping costs, delay deliveries and create additional uncertainty for energy importers.
Varga indicated that the absence of progress towards reducing tensions in both Eastern Europe and the Middle East was continuing to support a geopolitical risk premium in oil prices.
He also suggested that the increase in tanker attacks and tensions between Houthi forces and Saudi Arabia could prevent regional exports from returning to the elevated levels recorded in September.
These concerns have complicated the outlook for supply, even as traders consider the potential availability of additional Russian fuel.
Shipping and Insurance Costs Add to Supply Challenges
Ministers from OPEC and non-OPEC countries participating in the Declaration of Cooperation highlighted the sharp increase in maritime transport and insurance expenses.
According to the ministers, these costs have reached unprecedented levels exceeding one-third of the value of the commodities being transported.
Such increases can significantly affect the economics of crude oil and refined product shipments, particularly along routes exposed to security risks.
Higher freight and insurance expenses may also influence the prices paid by refiners and energy importers, even when benchmark crude prices decline.
The additional costs create difficulties for the efficient movement of petroleum products and could contribute to regional differences in fuel availability.
The situation demonstrates how disruptions to shipping infrastructure can affect global energy markets beyond the immediate loss of physical supply.
OPEC Cuts Oil Demand Growth Forecast
Alongside supply concerns, the outlook for global oil consumption has become another important factor influencing prices.
OPEC has reduced its forecast for oil demand growth this year to 400,000 barrels per day, compared with an estimate of 1.4 million barrels per day at the beginning of the year.
OPEC Secretary General Haitham Al Ghais said on Monday that the revision reflected developments observed throughout the year.
The reduction represents a substantial downgrade in expected demand growth and suggests that consumption is increasing more slowly than previously anticipated.
Weaker demand growth could limit upward pressure on oil prices, particularly if additional supplies become available.
However, the effect on prices will also depend on actual production levels, export disruptions and the ability of international shipping networks to maintain deliveries.
Oil Market Outlook Remains Uncertain
Tuesday’s decline in crude prices reflected the competing influences of potential additional Russian diesel supplies and persistent geopolitical threats to energy infrastructure.
The possibility of increased fuel exports could ease market tightness, but uncertainty surrounding Russia’s refining capacity and the legal framework for the agreement remains significant.
At the same time, attacks on shipping routes in the Middle East and rising insurance costs continue to threaten the reliability and affordability of international energy transport.
OPEC’s reduced demand growth forecast adds another consideration for traders assessing the balance between global supply and consumption.
Oil prices are therefore likely to remain sensitive to developments in Russian export policy, security conditions around the Strait of Hormuz and changes in expectations for global energy demand.